The length of time the Federal Reserve keeps its key interest rate near zero will depend on how far the U.S. economy remains from the central bank's employment and inflation goals, and how long it will likely take to meet them, Fed Chair Janet Yellen said on Wednesday.

Yellen, in her second public speech as Fed chair, largely restated the central bank's stance, stressing that it would respond to shifting economic conditions as it judges when to finally tighten monetary policy.

The idea that monetary policy should react in a systematic manner in order to blunt the effect of shocks has remained central in FOMC's policymaking during this recovery: Yellen

by Amy Tennery (Reuters)4/16/2014 4:47:30 PM

Nearly five years into the expansion that began after the financial crisis and the Great Recession, the recovery has come a long way. More than 8 million jobs have been added to nonfarm payrolls since 2009, almost the same number lost as a result of the recession. Led by a resurgent auto industry, manufacturing output has also nearly returned to its pre-recession peak. While the housing market still has far to go, it seems to have turned a corner.

It is a sign of how far the economy has come that a return to full employment is, for the first time since the crisis, in the medium-term outlooks of many forecasters. It is a reminder of how far we have to go, however, that this long-awaited outcome is projected to be more than two years away.

Today I will discuss how my colleagues on the Federal Open Market Committee (FOMC) and I view the state of the economy and how this view is likely to shape our efforts to promote a return to maximum employment in a context of price stability. I will start with the FOMC's outlook, which foresees a gradual return over the next two to three years of economic conditions consistent with its mandate.

The FOMC statement underscores that purchases are not on a preset course: Yellen

by Amy Tennery (Reuters)4/16/2014 4:53:34 PM

Reader Comment: I hate the approach the fed and banks around the world approach inflation. I do not earn a six figure salary and inflation is killing me. I cannot even afford a burger thing burger. $8 bucks for a pitiful excuse of a lunch, an economy car costs more than my parents house did (let alone a standard sedan!!!). AND YET, the fed, so called, expert economists state all the time there is "not enough inflation".

by D edited by Amy Tennery (Reuters)4/16/2014 4:53:48 PM

The expectation that the achievement of our economic objectives will likely require low real interest rates for some time is again not confined to the United States but is shared broadly across many advanced economies: Yellen

by cassandra.garrison4/16/2014 4:57:36 PM

Reader comment: Even under the Keynsian policies many of the fed chairs do not admit they adhere to, inflation is NOT a goal, merely something to control, that occurs "naturally". There is no target, ideally inflation is 0 and she can stick her hands in her pockets.

by Hiricine edited by cassandra.garrison4/16/2014 5:01:37 PM

Reader comment: The housing market is strong but artificially strong ( look at who are doing the purchases) , the data on employment does not appear to be that strong and stable, there are still plenty of unemployed people who can no longer receive benefits, this is not the right time to raise interest rate.

by Anne Sutardji edited by cassandra.garrison4/16/2014 5:01:42 PM

Reader comment: hit the enter button by mistake. On inflation; let those SOB economists promoting higher inflation have to work my lousy job and live on my lousy pay and see their smug, bourgeois attitudes disappear. Inflation BAD period!! putting us average people on the street!!!!

by D edited by cassandra.garrison4/16/2014 5:01:46 PM

In her speech to the Economic Club of New York, Ms. Yellen outlined how the Fed plans to respond to unexpected developments in the economy, saying that the Fed has set targets for returning to something close to a full employment rate of around 5.5 percent sometime in 2016, but that officials will adjust policy to encourage growth if the economy falls short of those goals.

As the recovery proceeds and healing occurs, it's obvious we will need to tighten monetary policy to avoid overshooting our target: Yellen

by cassandra.garrison4/16/2014 5:07:41 PM

Reader comment: The problem with inflation is that they do not use gas and food prices to calculate it. That is most of what the lower and middle class spend money on. Why is that part of inflation?

by Greg Sisitki edited by cassandra.garrison4/16/2014 5:07:52 PM

Reader comment: The Fed is only for the Banks, giving them a free ride and making it imposible for seniors to do anything. The banks get to use and invest seniors money without paying a decent rate of interest. After workin 44 years at low paying jobs and saving every dollar possible, the banks get the benefit of our saveings. We still have to live off social security and would take it if they could. What a government!

by Elsie edited by cassandra.garrison4/16/2014 5:08:03 PM

Reader comment: Where is inflation at 1.0 %?

by jack edited by cassandra.garrison4/16/2014 5:08:13 PM

Reader comment: Go to the supermarket and price meat ,veggies and dairy products.Go back six years and if you are not frightened by the inflation you better start.

by Bill Bailey edited by cassandra.garrison4/16/2014 5:11:29 PM

Reader comment: FED rapes Americans and says not a word about Wall St lobying for work visas and outsourcing.

by BobM edited by cassandra.garrison4/16/2014 5:11:37 PM

Reader comment: Why is 2% inflation so desirable? The FED has hurt the poor and the middle class. If you make 50k a year with 2% inflation, your costs go up by 1k per year with no wage growth. You are toast! Not only that, but the things you buy are inflating at 5% or more: food, energy, health care and education! Your basket is different. The Fed is the enemy of the working class.

by Hanover Guy edited by cassandra.garrison4/16/2014 5:12:09 PM

Reader comment: FED is a tool to steal our savings for the Rich Banker

by BobM edited by cassandra.garrison4/16/2014 5:12:11 PM

Reader comment: It's a shame how the people handling things today rob the ordinary folks of earning anything on their savings. Using the rate of employment isn't something that will likely have interest rates increasing soon is a mirage. Being retired today is a joke; there is no money to do anything for enjoyment. Actually most of us retired folks would be just as well off dead; we no life to speak of.

European shares fell and the dollar hovered above six-month lows against a basket of currencies on Wednesday on an overnight drop in U.S. tech stocks and on concerns over the deepening crisis in Ukraine.

Investors were also awaiting congressional testimony from U.S. Federal Reserve Chair Janet Yellen later in the day.

U.S. stock futures were pointing to a lower start on Wall Street, after the tech-heavy Nasdaq index .IXIC fell 1.4 percent in the previous session.

It’s really pretty simple: Unemployment, as traditionally defined, will be nearly normal by the end of the year barring something unforeseen — but that’s not enough. Wages, while ticking up by then, will still make little to no dent in four decades of after-inflation stagnation, decades that have seen massive wealth accumulations. And the Fed wants to do better for hard-working people in the middle, the folks socialists like Henry Ford used to look out for . And Yellen can fill that role if she wants to.

The dollar’s change of late cannot be explained by rates or even the reversal of safe-haven trades alone. Nonetheless, the fact that long-end yields of the U.S. curve continue to fall, despite building evidence that a strong economic recovery is underway, seems to be undermining investor confidence in the mighty dollar. In fixed income, long U.S. product is trading more like a commodity, with demand smothering supply and artificially weighing even more on yields than the Fed’s easing intentions. Dealers have cited other reasons for the dollar’s demise, noting central bank and pension fund buying in a rebalancing of reserves and portfolios. All good enough reasons, but the market wants more.

"The economy has continued to recover from the steep recession of 2008 and 2009. Real gross domestic product (GDP) growth stepped up to an average annual rate of about 3-1/4 percent over the second half of last year, a faster pace than in the first half and during the preceding two years. Although real GDP growth is currently estimated to have paused in the first quarter of this year, I see that pause as mostly reflecting transitory factors, including the effects of the unusually cold and snowy winter weather. With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter. One cautionary note, though, is that readings on housing activity--a sector that has been recovering since 2011--have remained disappointing so far this year and will bear watching."

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